Richards’ analysis of the effects of market size on regulatory dynamics in the international
civil aviation industry is particularly illustrative as he explicitly models a sequential bargaining
process that is frequently alleged in the literature but rarely specified. International regulatory
negotiations, he argues, take place in the shadow of the reversion point, that is, the set of market
place rules that the market will revert back to if there is no new international agreement. States
that have “market power to unilaterally define market place rules” are “able to dictate the
reversion point…and are thereby able to define the choice set available to foreign
international rules that favor their competitors.
After World War II, the physical scope of the
British Empire at a time when planes needed to land frequently and refuel gave British
negotiators a decisive edge over their U.S. counterparts. Once technological change had reduced
the value of overseas possessions, however, the U.S. could draw on its much larger share of the
international commercial aviation market to shape market rules according to its preferences. In
each instance, market size and the resulting ability to define the reversion point determined
whose preferences would be reflected in international rules.
Existing literature is clear in its causal focus on domestic market size as the critical
determinant of international market power. Some authors stress the gravitational “pull” of major
markets whereas others emphasize the centrality of large markets to “push” specific regulatory
standards internationally. Some focus on the overall size of domestic economies whereas others
adopt a sectoral lens and highlight international market share. But the shared expectation is that
patterns of international regulatory influence closely reflect differences in market size across the
principal protagonists. This leads to straightforward empirical expectations. International
15
Richards 1999, 13 .
16
See also Oatley and Nabors 1998 and Gruber 2000.
8
Convention